Back

RBI paper says Basel norms proved positive for Indian bks in long run

Informist, Tuesday, Jan 11, 2022

 

MUMBAI – While the implementation of the Basel-I capital had triggered an unfavourable reaction from investors, the fact that Basel-II and Basel-III norms led to a rise in stock prices of banks suggests that implementing these global regulations had a favourable impact on the banking sector in the long run, according to a Reserve Bank of India working paper.

 

The paper, titled 'Stock Price Reaction on the Announcement of Basel Implementation: Evidence from Indian Banks', is part of the working paper series in which RBI officials often carry out research collaboratively with other experts.

 

The paper is authored by Gaurav Seth, Supriya Katti and B.V. Phani. Seth is an assistant general manager at the central bank, while Katti is a project scientist and Phani is professor at Indian Institute of Technology, Kanpur.

 

"The policy decisions with respect to Basel II and III, in general, received a positive reaction with small deviations in some of the event windows in the short run. The multivariate analysis does not show any significant impact of bank specific characteristics on the market performance of various events confirming the strong announcement effect," the paper said.

 

It added that investors showed confidence in the RBI's policy decision of aligning Indian bank regulations with global best practices of Basel capital adequacy norms.

 

This was in sharp contrast to the Basel-I scenario, when Indian banks were not prepared to raise the capital to 9%, and led to an overreaction from markets, which were largely pessimistic. But the long-term gains and the experience from this event meant banks were better prepared for the subsequent changes in capital norms under Basel-II and Basel-III.  End

 

Reported by T. Bijoy Idicheriah

Edited by Avishek Dutta

 

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2022. All rights reserved.

Other News

Informist Poll: Gold may struggle in Feb as focus on Fed rate hikes

Informist, Tuesday, Feb 7, 2023 By Sayantan Sarkar MUMBAI – After starting the year strong, gold prices may struggle to maintain the momentum in February due to the dollar's appreciation against major currencies and worries that the US Federal Reserve will continue to increase rates in the future. In the domestic market, the rupee's depreciation against the dollar […]

India Gilts Review: End tad up as OIS rates fall; MPC outcome eyed

Informist, Tuesday, Feb 7, 2023 By Anjali and Kasthuri Akhil MUMBAI/NEW DELHI – Government bond prices ended slightly up tracking a fall in overnight indexed swap rates, dealers said. Meanwhile, traders maintained caution ahead of the central bank's monetary policy decision due Wednesday, which limiting the gains. The 10-year benchmark 7.26%, 2032 bond ended at 99.66 rupees, or 7.31% yield, against 99.59 rupees, or 7.32% […]

INTERVIEW:Consumer affairs secy sees food price mostly stable this yr

Informist, Tuesday, Feb 7, 2023 –Consumer affairs secy: See vegetables, pulses prices stable this year–Expect wheat prices to fall further–Will procure tur over MSP via e-auction–NAFED to procure 250,000 tn onion in FY24 too–Expect onion crop to be bumper 2023-24–NAFED to continue procurement of pulses–Imported tur procurement halt only temporary–To procure tur, urad irrespective of MSP By Arunima […]